There are times when nothing can change the fact that you can't make your debt payments. It can feel as though no matter what you do, your debt isn't budging and there's no let up in sight.

So what can you do when an affordable payment plan is no longer an option? In this article we asked Multiply's Head of Advice, Peter, to give us a run down of the final things you can do when dealing with debt.

First things first

"As you read through the options below, they seem a little daunting to say the least. The thing is debt can have serious implications for your health if you don't get it sorted. What is important is you and your family. Worrying about your credit rating and your ability to borrow in the future is small fry."

Your health must be your priority throughout the process of dealing with your debt. Financial stress can impact your mental and physical health.

The NHS have some guidance on how to cope with money worries, but they are not the only resource out there. All the debt charities listed below give some great advice on this important topic too.

The reality is that going down one of these routes actually takes a big weight off your shoulders. It can be a real positive. If you find yourself in this situation please seek out all the help you need. People who've been there say they feel a massive sense of relief after seeking help.

What are the options?

Debt Management Plan (DMP)

If you are in Scotland, you may see this referred to as a Debt Payment Programme (DPP).

This is an informal agreement between you and your creditors for paying back your non-priority debts. In Debt Series #3 we spoke about the two main debt types: credit cards, loans and store cards.

Most DMPs are managed by a DMP provider who deals with your creditors for you. This means you don't speak to them as soon as they take over.

Finding a DMP provider

"Firstly you need to find  a DMP provider. There are lots of companies out there offering different services, including charities. If they are offering a service that involves handling your money they should be authorised by the FCA. I would generally recommend one of the free charity-based providers"

When you are looking for a provider it's worth bearing in mind three things:

• How quickly do you need to get things sorted? Some of the charities have huge case loads so are not always able to help as quickly.
• What are they actually charging you? Charities are free, but typically receive payments from the creditors. Some providers appear cheap but hide costs in the small print. Others seem expensive, but may be able to work out better deals with your creditors.
• You can cancel your Debt Management Plan at any time.

How does it work?

Once you have found your DMP provider, they will speak to your creditors and negotiate with them on your behalf. It doesn't matter how many individual debts you have, a DMP will allow you to pay them back in one affordable monthly payment.

This payment is paid to your DMP provider and they are responsible for dividing it between your creditors. Presume your DMP provider reviews your plan each year to see if the agreed payment needs to change.

Some creditors insist on a note of the DMP being put onto your credit file. This can affect your ability to borrow money in the future.

Debt Relief Order (DRO)

"If you have less that £20,000 in debt, with no assets and savings and a low disposable income then this is an option."

Although this is a legal solution, you don't need to appear in court. However, you do need to pay a £90 charge to set it up.

How does it work?

A DRO freezes the interest and payments on the debt included in your DRO for a period of up to 12 months. During this time your creditors can’t force you to pay off the debts.

When the DRO ends, most of your debts will be written off. It will however have an affect on your credit rating. Creditors and Lenders will be able to see that you have struggled to keep on top of your repayments.

If your situation changes during the year you need to advise the official receiver. When your DRO was set up you will have received an advice. This advice will contain all the details of the official receiver and who to contact in the event that your circumstances change.

Word of caution

It is really important that you make sure all the details in the application are correct. If they are not it could result in one of three things happening:

• Cancellation of the DRO
• Issuance of criminal charges against you which could result in a fine and / or imprisonment
• Issuance of a debt relief restrictions order. This come with serious consequences and repercussions that can affect your life for a considerable time afterwards

Before applying, during the application process and when you have a DRO, you need to be squeaky clean. In short, nothing short of absolute honesty and integrity is required throughout the whole process.

Administration Order (AO)

"An administration order is a legally binding repayment plan. Both you and your creditors must stick to it."

In general this is suitable for someone who has some disposable income and doesn't want to talk to their creditors. Before you can apply you must meet two conditions:

• Have two or more debts totalling less than £5,000
• Have an unpaid court judgement against you

If you don’t meet the conditions and you think this is right for you. There are a couple of things you can do.

• You can wait for one of your creditors to take court action against you. As soon as judgement is entered you can apply for an AO
• You can negotiate with your creditors or apply for a charitable grant to pay off part of it to reduce the debt to below £5,000.

How does it work?

There is no upfront fee for setting up an AO but the courts will keep 10% of your repayments to cover costs.

The court will assess all of your debts and your income. They will work out an affordable repayment plan for up to three years. Although creditors can ask to be kept out of the AO, the court will make the final decision.

Like with every debt solution there are additional caveats, extras and warnings. The most important ones to note here are:

• It's advisable to leave out anything to do with rent or mortgage arrears
• You can apply for a composition order that means anything owing after three years will automatically be written off

What's the impact?

You need to be aware of the main repercussions of an AO:

• You could be forced to sell larger possessions, such as a car, to pay for your AO
• Your credit rating will be affected
• There is a chance it could affect your job. It is worth checking the terms and conditions of your employment or professional codes of practice

Individual Voluntary Arrangement (IVA)

"Although these can offer the flexibility you need, they can also be expensive. The people you need to set them up charge a lot for the services they provide. So make sure this is not only what you need but also what you can afford."

This is another form of legal repayment plan between you and your creditors. An IVA is suitable for someone who has a regular income and can afford to make repayments, but doesn't want to talk to their creditors.

You can get an IVA if you have two or more debts totalling less than £10,000, but it can be expensive so this is normally seen as the minimum. A typical IVA costs between £4,000 and £5,000 over it's lifetime.

If you own a home or a business an IVA can be a better solution to bankruptcy.

Finding an insolvency practitioner

An IVA must be set up by a qualified person, called an insolvency practitioner, which is typically a lawyer or an accountant. You can find one on the government website.

Although you can use a debt management practitioner, it can mean incurring additional charges.

How does it work?

The insolvency practitioner guides you through the stages of the IVA process. Their primary goal is to help you negotiate an affordable repayment plan. They are also responsible for dealing with your creditors throughout the life of the IVA.

When the repayment plan becomes legally binding you will be required to make a single payment every month to the insolvency practitioner. They will deduct their fees and distribute the money to your creditors.

The arrangement typically lasts for 5 to 6 years. Any debt outstanding at the end of the process is normally written off.

What's the impact?

You need to be aware of the main repercussions of an IVA:

• You may have to remortgage your home if your home has equity
• Your credit rating will be is affected which will affect your access to finance
• You may have to sell any expensive items, such as cars
• Check the terms and conditions of your job. Certain industries have strict guidelines which may affect your employment

Bankruptcy

"Bankruptcy is generally the last resort when it comes to a debt solution. Even though this is an option, it is not one to take lightly."

There are three reasons that a bankruptcy order can be made:

• If you can't pay back your debt
• If you owe more than £5,000, one or more of your creditors can start proceedings in court
• If you have broken the terms of your IVA

If you are making the application yourself, make sure Bankruptcy is right for you. Citizens Advice have a helpful checklist online that will guide you through this process.

How does it work?

If you are eligible for a fee of £680 and the submission of an online form, you can go bankrupt. This means that all your assets, less a small amount of 'exempt goods' are distributed amongst your creditors.

Bankruptcy is a legal status which typically lasts for 12-months. After this time it allows you to make a fresh start free of debt. Although it does cover most forms of debt, it doesn't cover everything.

There may be other restrictions that apply for up to 15 years and you may have to continue to make some payments for up to three years.

What's the impact?

"The biggest impact will be on your life. The lasting effects of bankruptcy go way beyond the first year."

You need to be aware of the main repercussions of bankruptcy:

• You could lose your home even if you are in rental accommodation
• Your bankruptcy will be publicised in the newspaper
• Your credit rating will be is affected for six years, meaning access to finance becomes difficult
• Most of your possessions will be sold unless they are exempt goods: household items, clothes, and things you need to do your job, that are valued at less than £2,000
• Check the terms an conditions of your job. If you hold certain positions or you work in a certain industry your job may be affected.

The final word

"The final debt solutions are emotional, difficult and complex. This overview is intended to give you the headlines, but the devil is in the detail. It is for this reason that I strongly recommend that you talk to a debt specialist."

There is a vast amount of help out there online, but getting one on one help is essential to make sure you choose the right solution for you. There are three great organisations offering free services that Peter recommends as a starting point:

• StepChange
• Citizens Advice
• National Debtline

If you're in a situation that requires one of these solutions, we understand it must be very hard for you right now. So we thought we would end on a few wise words from Peter.

"These are serious decisions you have to make, and often when you are at your lowest. Rest assured, there is nothing to be afraid of. Getting your financial situation sorted will reduce the time spent worrying and get rid of those difficult letters and emails from creditors. The history books show us that often people rise to their greatest achievements after a time of financial difficulty. Walt Disney was one such man, and look at what he achieved."

If you have any questions, please get in touch at support@multiply.ai.